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AG Opinion a Blow to Berkshire Hathaway in Texas Dispute

August 4, 2017 0 Comments

Berkshire Hathaway, billionaire Warren Buffett’s conglomerate, is having some trouble with a law in Texas.

As we reported earlier this week, the conglomerate, which owns both a vehicle manufacturer and a dealership, has been trying to get around a law saying that it’s one or the other – that a vehicle manufacturer cannot also own dealerships in the state of Texas.

On Monday, Attorney General Ken Paxton released an opinion that rejected a “legal loophole” that would allow Berkshire Hathaway to continue to sell cars in Texas.

In Buffett’s case, though, it was argued that while the conglomerate does own a manufacturer and a dealership, the two deal with different types of vehicles. Forest River, based in Indiana, makes recreational vehicles. Berkshire Hathaway Automotive, based in Irving, sells cars.

In April, the Department of Motor Vehicles opened an investigation into Berkshire Hathaway to determine if the conglomerate was violating state laws and potentially subject to fines.

In July, DMV board chairman Raymond Palacios Jr. wrote to the AG asking if the conglomerate’s two automotive parts – manufacturer and dealership – would still be affiliated if Berkshire Hathaway “wholly [owned] a motor vehicle manufacturer but [relinquished] control of the manufacturer.”

In Paxton’s opinion on Monday, he said that just switching up the legal language wasn’t enough to change his perspective on the matter, and that it likely wouldn’t change the court’s either. He said that “the common understanding of ‘affiliated with’ includes both ownership and control.”

In the spring of this year, Texas Sen. Kelly Hancock (R-North Richland Hills) filed a possible “legislative solution” that, had it gone anywhere, could have let vehicle manufacturers own dealerships as long as the vehicles sold or serviced were different from those produced.

Three years ago, Buffett bought Van Tuyl Group to the surprise of the auto industry. It was the fifth-largest dealership group at the time with 75 dealerships. Buffett moved the headquarters to Irving from Phoenix and rechristened it Berkshire Hathaway Automotive.

Buffett Automotive Group now has over $9 billion in revenue and 85 independent dealerships in ten states, according to the company’s website.

Tesla, who is not allowed to own dealerships in Texas due to the same law, also took the legislative route to try and surmount the obstacle, but it never came to fruition.

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